Ch5: Perpetual and periodic inventory systems
Table 1: difference between service companies and merchandising companies 	
	Service companies شركات خدمات 	Merchandising companies  شركات تجارية	
Activities 	Perform services 	Buy and sell ( retailers تجار التجزئة / wholesalers تجار الجملة ) 	
Revenue 	Service rev 	Sales rev 	
Expenses 	Operating expense 	Cost of goods sold (COGS) & operating expenses 	
Income statement 	Service rev 
- operating expenses مصاريف تشغيلية 
= net income 	Sales rev (selling price * units sold)
- COGS  تكلفة البضائع المباعة 
= Gross profit الربح الاجمالي 
- operating expenses مصاريف تشغيلية 
= Net income صافي الربح 	
Operating cycle (from cash to cash )
الدورة التشغيلية 	Shorter than merchandising co, 
	Longer than service companies
	
Flow of costs
تدفق التكاليف  	
No inventory 	-	
-	
-	Beg inv + COGP = COGAS تكلفة البضائع المتاحة للبيع COGS + End inv = COGAS
              Beg inv + cogp = cogs + end inv 	

Table 2 : difference between inventory systems 	
	Perpetual systemنظام المخزون المستمر 	Periodic system نظام المخزون الدوري 	
End inv 	companies keep detailed records of the cost of each inventory purchase and sale . These records continuously—perpetually—show the inventory that should be on hand for every item.
ايمتى ما بدي بعرف قديش في بضاعة في المخازن من خلال الدفاتر المحاسبية 	companies do not keep detailed inventory records of the
goods on hand throughout the period.
At the end of each period the company takes a
physical inventory count to determine the cost of goods on hand.
لا استطيع معرفة كمية البضائع في المخازن الا عند عمل جرد في نهاية الفترة 	
COGS 	a company determines the cost of goods sold each time a sale occurs.	they determine the cost of goods sold only at
the end of the accounting period 
COGS = Beg inv + COGP – end inv 	
INFO GRAPH 			
Advantages 	High control رقابة عالية  ( high value products/ barcode system ) 	Cheap and easy to apply 	

Example on inventory systems 
1.	Purchase of inventory/ sale of inventory
-	On May 4, Sauk stereo purchased inventory of $3,800 form PW Audio supply company on account. This inventory cost PW Audio supply $2,400.
2.	Fright cost: تكليف النقل 
A.	On May 6, the responsible company paid freight cost of $150. The fright terms were FOB Shipping point.
   Or
B.	On May 6, the responsible company paid fright cost of $150. The fright terms were FOB destination
3.	Purchase return and allowances/ sale return and allowance
A.	On May 8, Sauk stereo returned goods that had a selling price of $300 to PW audio Supply. The cost of this returned inventory for PW Audio supply is $140. (assume no defect).
Or
B.	On May 8, Sauk stereo returned goods that had a selling price of $300 to PW audio Supply. The cost of this returned inventory for PW Audio supply is $140. ( goods had some defects and had a fair value of 100).
Or 
C.	On May 8, Sauk Stereo (buyer) received goods that was not as required. However, it chose to keep the goods after being granted a $50 allowance (reduction in price)
4.	Purchase discount/ sale discount 
A.	On May 14, Sauk paid the amount on account. The purchase term was 2/10, n/30.
Or
B.	On May 16, Sauk paid the amount on account. The purchase term was 2/10, n/30.
Required: 
A.	Journalise the previous transactions using perpetual and periodic inventory systems for both the buyer and the seller.